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Paul Belanger: Gold – The Ultimate Hedge

Tom welcomes a new guest to the show, Paul Belanger. Paul is a recently retired chemical engineer with an interesting YouTube channel, “Evidence Based Wealth,” where he analyzes various investing strategies.

Paul explains his background and what led him to take a deep dive into investing and economic theory.

Paul discusses past gold and silver standards and why the Treasury still considers the United States to be on a gold standard. Eighty percent of currency in circulation is composed of $100 notes which are mainly used as a store of value globally. The Treasury states that banks must hold collateral equal to the value of the Federal Reserve notes. That collateral is in the form of gold certificates and US Securities.

He contrasts the physical currency in circulation with the price of gold and details how this ratio has moved over the last forty years. If we were to return to a full gold standard today, the price of gold would have to increase by about four times.

Most investors don’t have a good appreciation for those rare black swan events. Periodically, financial catastrophes occur in markets. This is why wealthy people own choice land, art, fine furniture, and gold. These are things that can carry wealth through to the other side of large financial events. Gold is one of the only few things the average person can use to preserve wealth.

He explains the importance of balancing one’s portfolio and believes an optimum portfolio is one with 65% stocks and 35% gold. This approach seems to give the best overall balance for good returns while minimizing risks. It’s also important to periodically rebalance these portfolios to maintain that ratio.

Time Stamp References:
0:00 – Introduction
0:45 – His Background
3:38 – Gold Standard
9:16 – Gold Certificates
14:21 – Currency/Gold Chart
25:15 – Probability Game
39:13 – Optimal Portfolio
46:00 – Risk Vs. Return
54:55 – Rebalancing
1:03:08 – Wrap Up

Talking Points From This Episode

  • Paul’s Background and interest in economics.
  • Gold standards and the current US Dollar.
  • Physical currency and the value of gold.
  • Managing market risk with gold and finding the optimum portfolio balance.

Guest Links:

Paul Belanger (belangp) is a chemical engineer by profession. He earned a Ph.D. in early 1997 and practiced for nearly 25 years, most recently serving as a director of R&D. He retired this year at the age of 50, having achieved financial independence, to live a different life. During his professional career, he became deeply interested in monetary science, exploring the nature of money, credit, and investments.

Paul started a YouTube channel in 2013 to share some of the theories he learned were true and highlight the flaws in the theories that he found to be false. The channel now has a few hundred videos that are available for free. The topics range from wealth building and preservation to economics and politics. The channel was recently renamed “Evidence Based Wealth.” Paul also recently launched a new Patreon site where he will offer access to written articles, books, and individual consultations.

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